Eating from the Tree of Investments: Annuities, good or bad?

Welcome to finishing well brought you by Cardinal Drive, certified financial planner belongs agile, best-selling author and financial planners helping families finish well for over 40 years of finishing well will examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Medicare IRA long-term care life insurance and investments and taxes. Now let's get started. Finishing well well today on finishing our topic is needing from the tree of investments and it occurs to me you know Adam and Eve. There they were in the garden and the serpent did his thing and Eve essentially had a choice that she could eat from the tree of knowledge, or she could eat from the tree of life, and I think we know where she went.

The interesting thing is had she eaten from the tree of life. She would've lived forever. There was everlasting and interestingly I as I've been listening to Hans on these different types of investments as we finish well you know there's everlasting investments.

I didn't realize that that the ones that would go on and on but it almost seems to be similar as we look at some of the investments know it takes a great dinner knowledge to manage them in the Bible is pretty clear that knowledge puffs up, but love builds up and so in eating of life, which we know is Jesus then you know that builds up for the body.

It brings health and and and and true wealth so getting in that way. As I described that Hans you know this is a big deal. You were here we have a lot of wealth in this country and people are going to decide in these waning years. You know where they're going to go with that in mind, the red thought about it, but there are everlasting investments. Yeah, I mean. Many of our clients come to us at age 64 1/2 minutes. As you know were were were in the Medicare supplement Medicare advantage were in the Medicare business Cardinal advisors and Cardinal guy.com and so we have people all over the country that are going on Medicare for the first time in their coming to us for that advice and then we use that from a business purposes. That's all we meet people and so we serve them well in that and then many of these folks end up hiring us to do retirement planning for a lot of them are not even aware of the need for this and where that leads to you is we got a look at all they've got all the sources of income all their assets, money, retirement accounts and then we need to learn a bit about them and learn about their needs. Learn about their desires. There wants their fears, their concerns things that they love things that they're afraid of, and put together a package and a plan really a plan to live off of their money.

The rest of their life.

And of course we don't know how long that life is can and then we got married couple. We don't know how long. Both of them are going to be alive. We don't know when the first one is going to die and then we don't know how long the second one is going to live as a as a single individual with her to do whether to remarry or whether they're going to need them.

There's just so many uncertainties in retirement and so drawing back about what today's show is about is when people have savings and retirement savings. So how do we plan this out. How do we get this properly allocated. How do we get it invested in the right things so that they can meet all their goals and the biggest fear that these folks have my experience and this is validated and a lot of research is getting old sick and run out of money and becoming dependent upon their children or depending upon the state Lycan Medicaid and really losing control of their finances and just kind of their well-being that that fear is probably not as laid out that well, but when you really dig in with these folks as we do we do in retirement planning. That's really kind of the number one fear and we have some ways to plan for that so that we can certainly reduce so you know, as I think about that and is one of the seven worries, no postretirement investments.

If it's at the website it Cardinal guy.com.

Of course you can get the whole workbook download absolutely free by R7 worries tablet� Many times as a PDF there for free or you can order the book but worry takes away life. So does just having the worry like man but that is an interesting thing is that is I had a chance to sit down with you and I think the listers if they would take the time to to read this chapter, get a little bit of an understanding that there are strategies that clearly you would know beyond a shadow without the you are not gonna run out of money you not run out of the principal that you originally put in and there's other things that you know literally. A lot of people involved in that their risk and their lunch money and they don't even know they're doing they are selfish. So let's talk about the stock market and investing in stocks and bonds and allocating which we do as professionals not doing that on the show here, offering any stocks or investments just talking about him, but when I take it back to our clients and our audience for 50, 60, 70% of our audience. Stocks are just off the table. Very there either in in some level, and they want to get out of them or they got this retirement money, they got their savings. They're going you knowingly that they're not in it but they're just it's it's off the table. They don't want to get in.

So it really brings us to the question which I sent to you this morning which is really where can I invest my money. If it's not the stock market. Where can I invest my money are part of my money in such a way that I can draw principal and not run out of money.

We just look at a simple formula is if you put your money in CDs and you're getting between one and 2% actually gone up a little bit lately but I'm insist still in that area. 12% mean.

So if you draw any more than 2% out which a lot of folks need to do that.

Where's the point where you just run out of money and it certainly before the end of a long life.

I am bonds are sad honestly knew very very little about bonds and is probably still no not enough to even begin to speak on it but I'm I worked there you you know is if interest rates start to go up.

You would think would be a good thing but it can be a bad thing about my work for the people that hold bonds just for the purposes of the show, you can get in deeper in my book, but if interest rates like they have done over the last little bit here. They've gone out all the people that are holding bonds. The, the value of those bonds decreases every time interest rates go up. And so you know again it's given me something to worry about. Got my money tied up in the stock market went up and down or I got my money tied up, especially if it's my lunch understand if I got money to risk but if it's literally the money I need to live out the rest of my life.

It seems like it would be real good to have everlasting money on for you in in any is is lunch understand the risks in your not relying on this money and you get very old so you got enough safe money somewhere else stock markets. A great thing. I'm glad we have it, it creates the capital markets and creates new businesses. It creates jobs it creates wealth for people that have accumulated things. I have some of my own money in the stock market and you know it's doing very well thank you and and and many of you listening do and we've we've just been on a good run on that for now just I don't want to start quoting years and times, but it's been a long time since 2009 and we've been lulled a little bit to sleep of just and our expectations have grown to where we just expect to make a substantial return every year. And what's scary about that is, is that all that could be wiped out in a short order with some really bad news hitting the it hit hitting the really the news channels and really getting investors to just start going the other direction. So the great news is you got an example in your workbook of an investor who took advantage of this other plan that you're describing in the essentially annuities that wow you look at him and looks like no matter what she's got her income coming based on investments will yeah so most folks that we bring in a lot of them don't really have a clue of what what they want to do with their money and they've got a lot of fears but a lot of them pretty much assume that will organ a dues were just gonna put it in the stock market and to get a return and we certainly do that with some clients, but what we do first is what I consider earlier were to sit down and figure out you know what portion of your money is that you can't afford to lose and you're going to need to live off of this.

Are you going to need to have it available for you to you for the rest your life. He had about the best product that we can come up with for some of your money is an annuity of one form or another and I know that there's a lot of bad press out there about annuities and people will talk that they have high fees that they are sold and appropriate to older folks and to to some degree, they developed a bad name and what I want to do is respond and acknowledge that, and the fees can be high annuities but what I want talk about a little bit is what you get for those fees and I also want to talk a little bit.

On the other side we we represent about 30 different companies that sell annuities. We have the ability to represent up to about 60 and over a thousand different contracts that we can make available to our customers and so we certainly don't explain all thousands of them, so insurgents let's dig into the subject matter now that I've positioned it in this example that's in the workbook really talks about a person who put half of her money in this particular annuity that would guarantee that she could turn on an income at a future point in time, and when she turns on the income she would be guaranteed that amount for the rest of her life.

So even if the annuity ran out of money, she would still begin the chapter.

She lived on up into her 90s and hundred types, like everlasting money not just from sub the on the outside like the Social Security check so you know I mean I just set up client who just experience this just sheet she's now turning on the monies about these annuities and she's in her early 60s. She's now up there at 6068 or 69 years old. These annuities are six, seven, eight years old and we held back $100,000 of her money and then we put the balance of her money into different annuities so we can play around with the slivered with we let these annuities bake for 67 years.

As with the hundred thousand dollars was about and we created her an income of $1800 a month she needed and in addition to her Social Security check.

Just let so she between those two.

She's got about 3500 bucks a month and she's just happy she can be, and she spent that hundred thousand dollars down to nothing going on over several years and so now it's time to turn on one of the and so we turned on one of the annuities for you guessed it $1800 less rightly predicted all this and that it 1800 a month coming out of one of the annuities is guaranteed for the rest of her life so if she doesn't need any additional income for the rest of her life. The other one can just sit there and accumulate and she doesn't really need to check she can pull out 10% of the other one which has about $200,000 and she thought 10% anytime she wants just get three different air she had three different investments with us. One was a cash account invested in bonds that didn't really yield that much that she spent down the other was an annuity that had a guaranteed future income that she just turned on and then the other one was could create a guaranteed future income if that's what she ends up deciding to do.

Or it could just be a savings account that sitting there that she can pull from anytime she wants.) Plus be part of her estate so your listing to finishing well, a certified financial planner Hans child today show living on the train investments will be back in just a minute. Got a cardinal guide.com for more. We hope you are enjoying finishing well brought to you by cardinal guide.com is a cardinal guide.com for free downloads of previous shows, including episodes about Social Security and Medicare, IRAs, long-term care, life insurance, investments and taxes as well as Hans best-selling book, the complete cardinal guide to planning for and living in retirement. Plus the accompanying workbook. If you want to follow along with today's topic download free PDF cardinal guide.com by going to the seven worries tab of today's show topic to scroll down to useful documents once again for free resources shows go to get Hans book the complete cardinal guide to planning for and living in retirement or the workbook go to cardinal guide.com you have a question, comment or suggestion for future shows.

Click on finishing well radio show and send us a word. Once again, that's cardinal guide.com cardinal guide.com now back to finishing well brought by Arnold guide.com welcome back to finishing well with certified financial planner Hans child is book. Of course, we always want talk about is the complete cardinal guide to planning for and living with living in retirement and it got the book you got the workbook there all available Derek cardinal guide.com today show is essentially eating from the tree of investments how that may work as a comparison to what you know Eve was faced with eating from the tree of knowledge or wish to eat from the tree of life at end. You know what the worry is that if you decide to take on all the responsibility of all that knowledge and all those things that you want to go into self in one of the questions that I think a lot of blisters and even I have would be well where can you put your retirement savings are a decent return. If you don't want to risk losing your money in stocks and the answer to that in many cases is fixed indexed annuities set with a heavy emphasis on the decent return part what just as a totally ignorant Saul that I am what is that mean fixed indexed annuities as opposed to unfixed indexed. If you yeah I was also a fixed indexed annuities. You just looked at the three words okay so the first word is fixed, meaning that there is not an uncertain return or there's not an uncertain loss. You have certainty is fixed as opposed to variable so you got a fixed and then the next word is indexed and indexed is like the S&P 500 Russell 2000 them and there's a whole number of indexes out there and so your return is going to be based upon a percentage of the index and then the word annuity which is which is a program that you're investing in its somewhat like the opposite of life insurance is with a life insurance company and it creates an income that you can outlive in other words, an income for life so fixed indexed annuities and with an emphasis on your depositing money into the annuity. Pay your premium and then the insurance company is guaranteeing that the worst return you're going to get in any given year is zero S. if you put this money in there. You cannot go backwards if the index that you're basing this on the S&P 500 index. If that's an example is backwards for a year so you would effectively lose money if you had your money in the S&P 500 with this product your balance.

The insurance company is guaranteeing that you will make zero in that year, so any down years. Your return is just to get keyboards that has to do with the principal not necessarily what income or the payments are receiving from an annuity would be if you turn the mom is correct about the previous site. This is during the accumulation period and South then you say well case and I know Michael losing money how much money am I gonna make weathers and upmarket welders of many different formulas for this is you can now they are a bit confusing. That's another place that these things are criticized for this where we can help you and make some sense of them, but typically 5060 70% of the return may be as much is 80% of the return of the S&P 500.

And so we have many clients getting very nice returns in the up years that we've been enjoying on their money that they really don't have at risk as it's in its insets and so another words if the S&P 500 went up 10% from year to year for your annuity year and you were on 70% of that, then you will earn 7% on money, that's not at risk. So if the annuity if the S&P 500 went down 10%, you would just earn zero in that year, so that's where the high fees as part of the place. The high fees can come is the insurance company is guaranteeing you won't lose money letting you participate in the upside, I got a charge a fee for that, and so on that when you say fees weren't word of the fees apply to what is with you. Fees are going out apply to, for starters.

Is is is that if you talk about an S&P 500 return and it earn 10% you only get 70% of that 60%.

There is a fee everything that 100% right the second place, you can have fees is in where you have purchased a writer which is separate from all this is were talking about and it guarantees an income to you an income for life, starting at a point in the future a little confusing to get into the example that you brought up in the book is people typically by these writers on these fixed indexed annuities which are really a way to guarantee an income for life and it's going to be a larger income for life. The longer you wait to turn it on so you can buy one of these things at 64 have a plan to wait to draw on it to your 70 and once turn on the income at 70 than that income amount is guaranteed for the rest of your life no matter how the annuity performed or how the stock market performed essentially are sitting there. Once you made this particular decision with her so security is it is common for life, your annuities, and for life and and so you sit there and was there to worry about will yeah and then typically we don't put all people's money and Samina like the example in the book, the one place we had put 255,000 of this lady's money in there within uncertain time as to when were going to start drawing and it lays out in the book all the option she would have, but I happen to know this lady had an additional $250,000 essentially put half her money in this annuity.

The other $250,000 we invested in the stock market environment for and she's drawing from that on an as-needed basis. And she's also paying taxes on the gain. Every year, but she has a total liquidity to the money so that she needed for something she could get very easily.

So what happens if she she's been pouring money in chapter 250 in the stock market she's living off that this annuities baking as you said yet so it's obviously rising rising rising. Now she dies happens in well.

So what's left in your account that's in the stock market is just going to go straight to her son is your only living survivor and so let's just say there's 150 that laughed and so that's kind of straight to him and of this annuity is if this is five years from now, the cash value of the annuity which will be more than the 255 that she put in their will just be paid out to the beneficiaries so annuities have beneficiaries like life insurance policy and avoid probate. That's the beauty of that also. That's that's not even comes with a well it's coming straight straight to the beneficiary that he's going to owe income taxes on the growth of that annuity. So another words is that 255 had grown to 300 and then she dies and goes to him. He's going to have a taxable event of 45 grand that we have ways to postpone that stretch that out as well, but he's getting a check for 300 cells getting a check for 300.

So, more likely, his discotheque Jack pay the taxes on the 45 something that that's one situation. So here there. It's let's say that she turn the thing on Gannett and it's and it's starting to pay out and she passes away, then what happens.

Start a payout she passes away and so you know it's just weekly. We looked at the example in the book you she'd started the income at 81.

The income was going to be $27,349 for the rest of her life and then as you said in the example is to say that she passed away in four years after that. Well, there simply to take the cash value of that annuity minus the 27,349 that she drawn out for three years and they're gonna pay that out as a beneficiary so simply you it you know your guarantee and they income. She has a guaranteed income of this than anything that isn't used is part of their estate.

Like the other alternative is a she lives 100 the things that can have any cash value that is probably in the early 90s and get to a cash value of zero and so the insurance companies can be pan is $27,349 to her for like 70 years, nine years, just out of their own money and then when she dies. There is can be no cash value go on to him. He's going to be pretty old. At that point himself and nobody's can be too worried about that but I want to connect it back. That's for the fees come is the insurance company has liabilities that some of these people are going to have to pay on this payout is money beyond the existence of the month so it's obvious to me that that there's a lot of stuff that you studied and learned and then you you have how many different companies that you do annuities with we got over 30 companies and we got about a thousand different products okay since we got off that we have mastery of, and we know where it's appropriate to use with twins and then you've got stock strategies bond strategies and Eve got all this information and so the thing that just strikes me between the eyes is man I got to find somebody that that I can trust with many counselors plan succeed and it be nice to know somebody who understands the ins and outs of one of these things and and clearly, if it's not Hans.

We gotta find somebody that we can trust a walk-through know what set so this is who you want to look for when you want to look for first and foremost you want with her Christian and then you will look for a fiduciary is a mini Christians out there talking insurance products are hocking investments that are fiduciaries. So, just as another ignorant apologize.

What's a fiduciary.

A fiduciary is a term we could all show on that. But at its heart is required by law to put our clients interests ahead of our meeting. Another word I did it completely affects you not I found out that a lot of years and I I've seen car salesman. The treated customers is is you know that their interests were ahead of their own, and I saw ones that treat the customers interest first and I could tell you which one succeeded. That's why I need a multitude of product offering is I need to be able to show what I recommended my client client in a specific situation was better than the other alternatives I could have. I hate Colorado time because you could see we can go for a while yet.

For more information for free copy of the book go to Cardinal guide yet, but the guide after the Cardinal Cardinal guide.com course, you can contact Hans directly download all this. These chapters on investments for free or just asking for the entire book or the workbook cons great time again today am constantly learning in a mic and got Cheryl my friends. I know the fiduciary.

We hope you enjoyed finishing well brought you by Cardinal guide.com visit Cardinal guide.com for free downloads of the show or previous shows on topics such as Social Security, Medicare and IRAs, long-term care and life insurance, investments and taxes as well as cons best-selling book, the complete Cardinal guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows what you get. Hans book go to Cardinal guide.com if you have a question, comment or suggestion for future shows. Click on the finishing well radio show on the website and send us a word.

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